Buyback cost estimate comes with warning
A report that informed the pricing of the firearms buyback scheme advised the Government to exercise caution when estimating its cost.
The pricing report, by consulting firm KPMG, also warned that despite its best efforts, the report may not capture the full depth and breadth of the complex scheme.
‘‘The tight timeframes and data gaps imposed a number of limitations on our ability to draw clear conclusions on how various pricing options would perform against the principles of the buyback scheme.’’
The report, and 17 other Government documents related to the buyback, were released yesterday.
In June, Finance Minister Grant Robertson and Police Minister Stuart Nash announced funding had been boosted to $208 million and the buyback price for prohibited firearms, paid only to those with a valid firearms licence, would reflect the brand, make and model of the prohibited firearm; its base price; and its condition. If necessary, funding would be topped up.
Community collection events started on July 13 and by Thursday, 6831 firearms had been handed in.
More than 4200 people had received $12,537,611 in compensation. Sixteen collection events are planned for today and the weekend.
The buyback price list showed a gun in new or near new condition would get 95 per cent of its base price; guns in used condition, 70 per cent; and guns in poor condition would get 25 per cent.
At the time, Nash and Police Commissioner Mike Bush refused to provide key details from the KPMG report. When Stuff asked police if the report was going to be released, it was told to make an Official Information Request.
The KPMG report says that without a national firearms register, it is not possible to understand the volume of firearms by make and model, or even at any price point. ‘‘It is not clear whether the majority of eligible firearms are at the midpoint of a price range or nearer the top or the bottom,’’ the report said.
‘‘For example, centrefire semiautomatics range in price from $1000 to $10,000, with most models in the range $2500-$4500. It is not clear whether the majority of NZ MSSAs are in that mid-range or whether most are cheaper than $2500.’’
A police briefing on May 27 outlined 10 possible pricing options provided by KPMG.
The 10 options reflected variations on three models: a value determined through a single fixed price; a value based on make and model; or a value based on the condition of the firearm.
Police recommended compensation based on the condition of the firearm, with three ‘‘price points’’.
KPMG proposed the price points at 95 per cent, 70 per cent and 25 per cent. Ministers agreed to the base price list developed by KPMG that they said reflected the fair market value prior to the law change.
By Thursday, 6831 firearms had been handed in for $12,537,611.
Ministers made no changes to the base prices developed by KPMG nor the condition-adjusted prices calculated by police.
KPMG used two statistical formulas to estimate the likely financial implications that were based on differing assumptions of what proportion of firearms were of lower value and what proportion were higher in value.
Police and Treasury considered the weighted average valuation to be the most appropriate indicator of costs; that indicated there were more low-value firearms than highvalue firearms in the community.
KPMG estimated the cost of the buyback could range from $75m to $233m using this approach.
The briefing noted compensation for prohibited parts and for dealers would add to those costs, which would take the estimated cost of the buyback to between $109m and $341m. A 75th percentile valuation produced an estimate of somewhere between $170m and $526m.
The total number of all weapons, both lawful and prohibited, was estimated to be between 1.2 million and 1.5 million. Police records show about 14,300 military style semiautomatics (now prohibited) were registered against licence-holders.
The documents also reveal gun parts were added to the buyback scheme, despite Treasury advising against it. As of Wednesday about 18,000 parts and accessories have been handed in.
The report also referenced Australia’s buyback scheme in 1996/97, where it was estimated 73 per cent of owners surrendered their prohibited firearms.
During the buyback, 643,726 prohibited firearms were handed in at a total cost to Government of about A$320m.